VOL.

209,MAY18,1992
BenguetElectricCooperative,Inc.vs.NLRC

55

G.R. No. 89070. May 18, 1992.*

BENGUET ELECTRIC COOPERATIVE, INC., petitioner,vs. NATIONAL LABOR
RELATIONS COMMISSION, PETER COSALAN and BOARD OF DIRECTORS OF
BENGUET ELECTRIC COOPERATIVE, INC.," respondents.

Remedial Law; Pleadings and Practice; The established rule is that the date of delivery
of pleadings to a private letter-forwarding agency is not to be considered as the date of filing
thereof in court and that in such cases, the date of actual receipt by the court and not the
date of delivery to the private carrier is deemed the date of filing of that pleading.
Respondent Board members' contention runs counter to
________________
* THIRD DIVISION.
** The Board was composed of the following individuals: (1) Victor Laoyan; (2) Nicasio Aliping; (3) Abundio
Awal; (4) Antonio Sudang Pan; and (5) Lorenzo Pilando.
56

SUPREMECOURTREPORTSANNOTATED

6
BenguetElectricCooperative,Inc.vs.NLRC
the established rule that transmission through a private carrier or letter-forwarder
instead of the Philippine Post Officeis not a recognized mode of filing pleadings. The
established rule is that the date of delivery of pleadings to a private letter-forwarding
agency is not to be considered as the date of filing thereof in court, and that in such cases,
the date of actual receipt by the court, and not the date of delivery to the private carrier, is
deemed the date of filing of that pleading.
Same; Same; The applicable rule was that the ten-day reglementary period to perfect an appeal
is mandatory and jurisdictional in nature, that failure to file an appeal within the reglementary
period renders the assailed decision final and executory and no longer subject to review.There was,
therefore, no reason grounded upon substantial justice and the prevention of serious miscarriage of
justice that might have justified the NLRC in disregarding the ten-day reglementary period for
perfection of an appeal by the respondent Board members, Accordingly, the applicable rule was that
the ten-day reglementary period to perfect an appeal is mandatory and jurisdictional in nature, that
failure to file an appeal within the reglementary period renders the assailed decision final and
executory and no longer subject to review.
Corporation Law; Damages; The Board Members and Officers of a corporation who purport to
act for and in behalf of the corporation, keep within the lawful scope of their authority in so acting
and act in good faith, do not become liable whether civilly or otherwise for the consequences of their
acts.The Board members and officers of a corporation who purport to act for and in behalf of the
corporation, keep within the lawful scope of their authority in so acting, and act in good faith,
do not become liable, whether civilly or otherwise, for the consequences of their acts. Those acts,
when they are such a nature and are done under such circumstances, are properly attributed to the
corporation alone and no personal liability is incurred by such officers and Board members,

PETITION for certiorari to review the decision of the National Labor Relations
Commission.
The facts are stated in the opinion of the Court.
Raymundo W. Celino for respondent Peter Cosalan.
Reenan Orate for respondent Board of Directors of BENECO.
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VOL.209,MAY18,1992
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57

FELICIANO, J.:
Private respondent Peter Cosalan was the General Manager of Petitioner Benguet
Electric Cooperative, Inc, ("Beneco"), having been elected as such by the Board of
Directors of Beneco, with the approval of the National Electrification Administrator,
Mr. Pedro Dumol, effective 16 October 1982.
On 3 November 1982, respondent Cosalan received Audit Memorandum No. 1
issued by the Commission on Audit ("COA"). This Memorandum noted that cash
advances received by officers and employees of petitioner Beneco in the amount of
P129,618.48 had been virtually written off in the books of Beneco. In the Audit
Memorandum, the COA directed petitioner Beneco to secure the approval of the
National Electrification Administration ("NEA") before writing off or condoning
those cash advances, and recommended the adoption of remedial measures.
On 12 November 1982, COA issued another MemorandumAudit Memorandum
No. 2addressed to respondent Peter Cosalan, inviting attention to the fact that
the audit of per diems and allowances received by officials and members of the
Board of Directors of Beneco showed substantial inconsistencies with the directives
of the NEA. The Audit Memorandum once again directed the taking of immediate
action in conformity with existing NEA regulations.
On 19 May 1983, petitioner Beneco received the COA Audit Report on the
financial status and operations of Beneco for the eight (8) month period ended 30
September 1982. This Audit Report noted and enumerated irregularities in the
utilization of funds amounting to P37 Million released by NEA to Beneco, and
recommended that appropriate remedial action be taken.
Having been made aware of the serious financial condition of Beneco and what
appeared to be mismanagement, respondent Cosalan initiated implementation of
the remedial measures recommended by the COA. The respondent members of the
Board of Beneco reacted by adopting a series of resolutions during the period from
23 June to 24 July 1984. These Board Resolutions abolished the housing allowance
of respondent Cosalan; reduced his salary and his representation and commutable
allowances; directed him to hold in abeyance all pend58

58

SUPREMECOURTREPORTSANNOTATED
BenguetElectricCooperative,Inc.vs.NLRC

ing personnel disciplinary actions; and struck his name out as a principal signatory
to transactions of petitioner Beneco.
During the period from 28 July to 25 September 1984, the respondent Beneco
Board members adopted another series of resolutions which resulted in the ouster of
respondent Cosalan as General Manager of Beneco and his exclusion from
performance of his regular duties as such, as well as the withholding of his salary
and allowances. These resolutions were as follows:

1. "1.Resolution No. 91-4 dated 28 July 1984: 'x x x that the services of Peter M.
Cosalan as General Manager of BENECO is terminated upon approval of
the National Electrification Administration;'
2. 2.Resolution No. 151-84 dated September 15, 1984; 'x x x that Peter M.
Cosalan is hereby suspended from his position as General Manager of the
Benguet Electric Cooperative, Inc. (BENECO) effective as of the start of the
office hours on September 24, 1984, until a final decision has been reached
by
the
NEA
on
his
dismissal;'
'x x x that GM Cosalan's suspension from office shall remain in full force and
effect until such suspension is sooner lifted, revoked or rescinded by the
Board of Directors; that all monies due him are withheld until cleared;'
3. 3.Resolution No. 176-84 dated September 25, 1984; 'x x x that Resolution No.
151-84, dated September 15, 1984 stands as preventive suspension for GM
Peter M. Cosalan.' "
1

Respondent Cosalan nevertheless continued to work as General Manager of Beneco,

in the belief that he could be suspended or removed only by duly authorized officials
of NEA, in accordance with provisions of P D. No. 269, as amended by P.D. No. 1645
(the statute creating the NEA, providing for its capitalization, powers and functions
and organization), the loan agreement between NEA and petitioner Beneco and the
NEA
2

_______________
1

Decision of the National Labor Relations Commission, pp. 1-2; Rollo, pp. 19-20.

Records, p. 53.

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59

Memorandum of 2 July 1980.3 Accordingly, on 5 October and 10 November 1984,

respondent Cosalan requested petitioner Beneco to release the compensation due
him. Beneco, acting through respondent Board members, denied the written request
of respondent Cosalan.
Respondent Cosalan then filed a complaint with the National Labor Relations
Commission ("NLRC") on 5 December 1984 against respondent members of the
Beneco Board, challenging the legality of the Board resolutions which ordered his
suspension and termination from the service and demanding payment of his
salaries and allowances. On 18 February 1985, Cosalan amended his complaint to
implead petitioner Beneco and respondent Board members, the latter in their
respective dual capacities as Directors and as private individuals.
In the course of the proceedings before the Labor Arbiter, Cosalan filed a motion
for reinstatement which, although opposed by petitioner Beneco, was granted on 23
October 1987 by Labor Arbiter Amado T. Adquilen. Petitioner Beneco complied with
the Labor Arbiter's order on 28 October 1987 through Resolution No. 10-90.

On 5 April 1988, the Labor Arbiter rendered a decision (a) confirming Cosalan's
reinstatement; (b) ordering payment to Cosalan of his backwages and allowances by
petitioner Beneco and respondent Board members, jointly and severally, for a period
of three (3) years without deduction or qualification, amounting to P344,000.00; and
(3) ordering the individual Board members to pay, jointly and severally, to Cosalan
moral damages of P50,000.00 plus attorney's fees of ten percent (10%) of the wages
and allowances awarded him.
Respondent Board members appealed to the NLRC, and there filed a Memor
andum on Appeal. Petitioner Beneco did not appeal, but moved to dismiss the
appeal filed by respondent Board members and for execution of judgment. By this
time, petitioner Beneco had a new set of directors.
In a decision dated 21 November 1988, public respondent NLRC modified the
award rendered by the Labor Arbiter by declaring that petitioner Beneco alone,and
not respondent
_______________
3

Id., p. 150.

60

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SUPREMECOURTREPORTSANNOTATED
BenguetElectricCooperative,Inc.vs.NLRC

Board members, was liable for respondent Cosalan's backwages and allowances, and
by ruling that there was no legal basis for the award of moral damages and
attorney's fees made by the Labor Arbiter.
Beneco, through its new set of directors, moved for reconsideration of the NLRC
decision, but without success.
In the present Petition for Certiorari, Beneco's principal contentions are two-fold:
first, that the NLRC had acted with grave abuse of discretion in accepting and
giving due course to respondent Board members' appeal although such appeal had
been filed out of time; and second, that the NLRC had acted with grave abuse of
discretion amounting to lack of jurisdiction in holding petitioner alone liable for
payment of the backwages and allowances due to Cosalan and releasing respondent
Board members from liability therefor.
We consider that petitioner's first contention is meritorious. There is no dispute
about the fact that the respondent Beneco Board members received the decision of
the Labor Arbiter on 21 April 1988. Accordingly, and because 1 May 1988 was a
legal holiday, they had only up to 2 May 1988 within which to perfect their appeal by
filing their memorandum on appeal. It is also not disputed that the respondent
Board members' memorandum on appeal was posted by registered mail on 3 May
1988 and received by the NLRC the following day. Clearly, the memorandum on
appeal was filed out of time.
Respondent Board members, however, insist that their Memorandum on Appeal
was filed on time because it was delivered for mailing on 1 May 1988 to the Garcia
Communications Company, a licensed private letter carrier. The Board members in
effect contend that the date of delivery to Garcia Communications was the date of
filing of their appeal memorandum.
4

Respondent Board member's contention runs counter to the established rule that
transmission through a private carrier or letter-forwarderinstead of the
Philippine Post Officeis not a recognized mode of filing pleadings. The established
rule is that the date of delivery of pleadings to a private letter-for5

_______________
4

Records, p. 322.

Section 1, Rule 13, Rules of Court.

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61

warding agency is not to be considered as the date of filing thereof in court, and that
in such cases, the date of actual receipt by the court, and not the date of delivery to
the private carrier, is deemed the date of filing of that pleading.
There was, therefore, no reason grounded upon substantial justice and the
prevention of serious miscarriage of justice that might have justified the NLRC in
disregarding the ten-day reglementary period for perfection of an appeal by the
respondent Board members. Accordingly, the applicable rule was that the ten-day
reglementary period to perfect an appeal is mandatory and jurisdictional in nature,
that failure to file an appeal within the reglementary period renders the assailed
decision final and executory and no longer subject to review. The respondent Board
members had thus lost their right to appeal from the decision of the Labor Arbiter
and the NLRC should have forthwith dismissed their appeal memorandum.
There is another and more compelling reason why the respondent Board
members' appeal should have been dismissed forthwith: that appeal was quite
bereft of merit. Both the Labor Arbiter and the NLRC had found that the indefinite
suspension and termination of services imposed by the respondent Board members
upon petitioner Cosalan was illegal. That illegality flowed, firstly, from the fact that
the suspension of Cosalan was continued long after expiration of the period of thirty
(30) days, which is the maximum period of preventive suspension that could be
lawfully imposed under Section 4, Rule XIV of the Omnibus Rules Implementing the
Labor Code. Secondly, Cosalan had been deprived of procedural due process by the
respondent Board members, He was never informed of the charges raised against
him and was given no opportunity to meet those charges and present his side of
whatever dispute existed; he was kept totally in the dark as to the reason or reasons
why he
6

_______________
6

See, e.g., Eslabon v. Spouses Ramon Magbanua, G.R. No. 76571, Resolution dated 1 April

1987; Pelenio v. Lebrillo, 83556, Resolution dated 8 November 1988.

7

E.g., Armigos v. Court of Appeals, 179 SCRA 1 (1989); Jocson v. Baguio, 179 SCRA 550 (1989); Chong

Guan Trading v. National Labor Relations Commission, 172 SCRA 831 (1989).
62

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SUPREMECOURTREPORTSANNOTATED
BenguetElectricCooperative,Inc.us.NLRC

had been suspended and effectively dismissed from the service of Beneco. Thirdly,
respondent Board members failed to adduce any cause which could reasonably be

regarded as lawful cause for the suspension and dismissal of respondent Cosalan
from his position as General Manager of Beneco. Cosalan was, in other words,
denied due process both procedural and substantive. Fourthly, respondent Board
members failed to obtain the prior approval of the NEA of their suspension and
dismissal of Cosalan, which prior approval was required, inter alia,under the
subsisting loan agreement between the NEA and Beneco. The requisite NEA
approval was subsequently sought by the respondent Board members; no NEA
approval was granted.
In reversing the decision of the Labor Arbiter declaring petitioner Beneco and
respondent Board members solidarily liable for the salary, allowances, damages and
attorney's fees awarded to respondent Cosalan, the NLRC said:
"x x x. A perusal of the records show that the members of the Board never acted in their
individual capacities. They were acting as a Board passing resolutions affecting their
general manager. If these resolutions and resultant acts transgressed the law, then
BENECO for which the Board was acting in behalf should bear responsibility. The records
do not disclose that the individual Board members were motivated by malice or bad faith,
rather, it reveals an intramural power play gone awry and misapprehension of its own rules
and regulations. For this reason, the decision holding the individual board members jointly
and severally liable with BENECO for Cosalan's backwages is untenable. The same goes for
the award of damages which does not have the proverbial leg to stand on.
The Labor Arbiter below should have heeded his own observation in his decision
'Respondent BENECO as an artificial person could not have, by itself, done anything to prevent it.
But because the former have acted while in office and in the course of their official functions as
directors of BENECO, x x x.'

Thus, the decision of the Labor Arbiter should be modified conformably with all the
foregoing holding BENECO solely liable for backwages and releasing the appellant board
members from any individual liabilities." (Italics supplied)
8

________________
8

Rollo, p. 36.

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63

The applicable general rule is clear enough. The Board members and officers of a
corporation who purport to act for and in behalf of the corporation, keep within the
lawful scope of their authority in so acting, and act in good faith, do not become
liable, whether civilly or otherwise, for the consequences of their acts. Those acts,
when they are such a nature and are done under such circumstances, are properly
attributed to the corporation alone and no personal liability is incurred by such
officers and Board members.
The major difficulty with the conclusion reached by the NLRC is that the NLRC
clearly overlooked or disregarded the circumstances under which respondent Board
members had in fact acted in the instant case. As noted earlier, the respondent
Board members responded to the efforts of Cosalan to take seriously and implement
the Audit Memoranda issued by the COA explicitly addressed to the petitioner
Beneco, first by stripping Cosalan of the privileges and perquisites attached to his
position as General Manager, then by suspending indefinitely and finally dismissing
9

Cosalan from such position. As also noted earlier, respondent Board members
offered no suggestion at all of any just or lawful cause that could sustain the
suspension and dismissal of Cosalan. They obviously wanted to get rid of Cosalan
and so acted, in the words of the NLRC itself, "with indecent haste" in removing him
from his position and denying him substantive and procedural due process. Thus,
the record showed strong indications that respondent Board members had illegally
suspended and dismissed Cosalan precisely because he was trying to remedy the
financial irregularities and violations of NEA regulations which the COA had
brought to the attention of Beneco. The conclusion reached by the NLRC that "the
records do not disclose that the individual Board members were motivated by malice
or bad faith" flew in the face of the evidence of record. At the very least, a strong
presump________________
9

See Pabalan, et al. v. National Labor Relations Commission, et al.,184 SCRA 495 (1990). See

also Garcia v. National Labor Relations Commission, 153 SCRA 639 (1987); Sunio v. National Labor
Relations Commission, 127 SCRA 390 (1984); Mindanao Motors Line, Inc. v. Court of Industrial
Relations, 6 SCRA 710 (1962).
64

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SUPREMECOURTREPORTSANNOTATED
BenguetElectricCooperative,Inc.vs.NLRC

tion had arisen, which it was incumbent upon respondent Board members to
disprove, that they had acted in reprisal against respondent Cosalan and in an
effort to suppress knowledge about and remedial measures against the financial
irregularities the COA Audits had unearthed. That burden respondent Board
members did not discharge.
The Solicitor General has urged that respondent Board members may be held
liable for damages under the foregoing circumstance under Section 31 of the
Corporation Code which reads as follows:

"Sec. 31. Liability of directors, trustees or officers.Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors or trustees shall
be jointly liable and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons x x x." (Italics supplied)

We agree with the Solicitor General, firstly, that Section 31 of the Corporation Code
is applicable in respect of Beneco and other electric cooperatives similarly situated.
Section 4 of the Corporation Code renders the provisions of that Code applicable in
a supplementary manner to all corporations, including those with special or
individual charters so long as those provisions are not inconsistent with such
charters. We find no provision in P.D. No. 269, as amended, that would exclude
expressly or by necessary implication the applicability of Section 31 of the
Corporation Code in respect of members of the boards of directors of electric
cooperatives. Indeed, P.D. No. 269 expressly describes these cooperatives
as "corporations:"

"Sec.
15. Organization
and
Purpose.Cooperative non-stock,
non-profit
membership corporations may be organized, and electric co-operative corporations heretofore

formed or registered under the Philippine non-Agricultural Co-operative Act may as

hereinafter provided be converted, under this Decree for the purpose of supplying, and of
promoting and encouraging the fullest use of, service on an area coverage basis at the
lowest cost consistent with sound economy and
65

VOL.209,MAY18,1992
65
BenguetElectricCooperative,Inc.vs.NLRC
the prudent management of the business of such corporations." (Italics supplied)
10

_______________
10

See also Section 17 of P.D. No. 269, as amended, which requires the members of electric cooperatives

to include the abbreviation "Inc." (in the name of the cooperative). Section 18 refers to the organizers of a
cooperative as "Incorporators." Sections 19-27 of the same statute refer to "Articles of Incorporation of a
Cooperative." Section 37 expressly incorporates the provision of limited liability of members (but not of
directors or other officers) which is the hallmark of corporations:
"No member shall be liable or responsible for any debts of the cooperative and the property of the members shall not be
subject to execution therefor."

The legislative intent to make applicable to directors and offi-cers of cooperatives generally (i.e.,
electric cooperatives, agricultural cooperatives etc.) the provisions of Section 31 of the Corporation Code,
was confirmed by Article 46 of the Philippine Cooperative Code (R.A. No. 6938, approved 10 March 1990).
Article 46 of the Cooperative Code reads as follows:
"Article 46. Liability of Directors, Officers and Committee Members.Directors, officers and committee members, who
willfully and knowingly vote for or assent to patently unlawful acts or who are guilty of gross negligence or bad faith in
directing the affairs of the cooperative or acquire any personal or pecuniary interest in conflict with their duty as such
directors, officers or committee members shall be liable jointly and severally for all damages or profits resulting
therefrom to the cooperative, members and other persons.
When a director, officer or committee member attempts to acquire or acquires, in violation of his duty, any interest
or equity adverse to the cooperative in respect to any matter which has been reposed in him in confidence, he shall, as
a trustee for the cooperative, be liable for damages and for double the profits which otherwise would have accrued to
the cooperative."

Article 122 of the Cooperative Code states that [e]lectric cooperatives shall be covered by this Code. x x x."
"

Upon the other hand, Article 127 of the same Code provides that electric cooperatives which qualify under
this Code "shall fall under the coverage of [P.D. No. 269 as amended]." The Cooperative Code is
substantially a reproduction of the general provisions of the Corporation Code.
66

66

SUPREMECOURTREPORTSANNOTATED
BenguetElectricCooperative,Inc.vs.NLRC

We agree with the Solicitor General, secondly, that respondent Board members were
guilty of "gross negligence or bad faith in directing the affairs of the corporation" in
enacting the series of resolutions noted earlier indefinitely suspending and
dismissing respondent Cosalan from the position of General Manager of Beneco.
Respondent Board members, in doing so, acted beyond the scope of their authority
as such Board members. The dismissal of an officer or employee in bad faith,
without lawful cause and without procedural due process, is an act that is contra
legem. It cannot be supposed that members of boards of directors derive any
authority to violate the express mandates of law or the clear legal rights of their
officers and employees by simply purporting to act for the corporation they control.
We believe and so hold, further, that not only are Beneco and respondent Board
members properly held solidarily liable for the awards made by the Labor Arbiter,

but also that petitioner Beneco which was controlled by and which could act only
through respondent Board members, has a right to be reimbursed for any amounts
that Beneco may be compelled to pay to respondent Cosalan. Such right of
reimbursement is essential if the innocent members of Beneco are not to be
penalized for the acts of respondent Board members which were both done in bad
faith andultra vires. The liability-generating acts here are the personal and
individual acts of respondent Board members, and are not properly attributed to
Beneco itself.
WHEREFORE, the Petition for Certiorari is GIVEN DUE COURSE, the
comment filed by respondent Board members is TREATED as their answer, and the
decision of the National Labor Relations Commission dated 21 November 1988 in
NLRC Case No. RAB-1-0313-84 is hereby SET ASIDE and the decision dated 5
April 1988 of Labor Arbiter Amado T. Adquilen hereby REINSTATED in toto. In
addition, respondent Board members are hereby ORDERED to reimburse petitioner
Beneco any amounts that it may be compelled to pay to respondent Cosalan by
virtue of the decision of Labor Arbiter Amado T. Adquilen. No pronouncement as to
costs.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ.,concur.
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VOL.209,MAY19,1992
PanAmericanWorldAirways,Inc.vs.Rapadas

67

Petition granted; decision set aside.

Note.Officers of a corporation are not liable for their official acts, unless they
exceeded authority (Pabalan vs. National Labor Relations Commission, 184 SCRA
495).
o0o
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